Municipalities Get Aggressive on REO

Local municipalities across the country are increasing penalties and fining lenders as much as $100 a day for code violations such as each broken window on an REO home, according to speakers on the vacant property registration panel at the Mortgage Bankers Association's National Mortgage Servicing Conference in Tampa. Robert Klein, chief executive of Safeguard Properties, said servicers need to make sure their property preservation units communicate with code enforcement officials at the city and county levels to open up dialogue and prevent this from happening. "If you won't listen, they will look for every legal measure they can to inflict some pain," he said. Cary Sternberg, senior vice president, American Home Mortgage Servicing, said servicers are searching for creative and aggressive strategies to dispose of these properties while figuring out the best way to preserve the assets. They are partnering up with preservation vendors to update the carpet, paint, and if needed, replace the roof, in order to make sure the home is in "lendable condition." Caroline Reaves, president and chief operating officer, Mortgage Contracting Services, said more mid-value and high-end properties are seeing cosmetic enhancements with furniture staging. The panelists also said home managers are sometimes being used to maintain the property and travel from house to house, to occupy and maintain the house.